New York City expects to generate a $3.7 billion surplus in fiscal year 2022 thanks to federal assistance, higher-than-expected tax revenue and projected savings, according to a report released today. today by State Comptroller Thomas P. DiNapoli on the city’s February financial plan. The surplus could reach at least $4.5 billion if revenue and spending stay on their current path, according to DiNapoli’s analysis.
“Strong revenues, a rebound in real estate values and the restart of the city’s Gap Elimination Program (PEG) will help produce significant recurring savings over the next few years and should help protect the city from the economic and fiscal uncertainty in the near future,” DiNapoli said. “The plan also addresses $1.2 billion of recurring risks that my office has previously raised. Nonetheless, more can be done to prepare for unforeseen risks. and to manage challenges, as rising spending is driven by inflation and other fiscal pressures. The city should also look for other ways to generate cost savings and build reserves to ensure a healthy recovery. smoothness and contribute to ensuring the quality of life of the city in the long term.
The city’s continued improvement in the fiscal recovery since the start of the fiscal year is expected to generate $1.7 billion in better-than-expected tax revenue for fiscal 2022, according to its February plan. The restart of the PEG, fueled by the reduction of vacancies for aggressive hiring targets, is expected to generate $866 million in savings in the current year and more than $1.1 billion annually in the years following.
The city’s financial situation gives it the option to increase its prepayments for fiscal year 2023 expenses, improve its rainy day fund or retiree health benefits trust, or reduce spending. future in another way. The city currently plans to use all of the surplus generated in that fiscal year to prepay a portion of its fiscal year 2023 debt service and help balance the budget in that fiscal year.
The updated financial plan balances the budget for fiscal year 2023 as the city moves closer to economic and fiscal normalcy. Federal aid will drop from 17% to 10% of planned annual spending, returning to its 10-year pre-pandemic average.
Property tax revenue is now expected to increase by $1.5 billion in fiscal 2023 from the prior year, an increase of $848 million from the November plan projection, with an expected increase in total property assessment of more than 8%. The projected valuation is expected to exceed the peak in fiscal 2021 three years earlier than expected.
Budget variances in fiscal year 2024 to fiscal year 2026 will average about $2.7 billion, an amount that has proven manageable historically. With the use of general and capital reserves, budget variances will average about $1.4 billion, or less than 2% of municipal fund revenues, consistent with pre-pandemic levels.
DiNapoli’s report notes that while the city’s current financial situation has improved significantly since the start of the pandemic, there are likely to be significant fiscal challenges ahead, including the possible impacts of geopolitical tensions and sanctions on the Russia, Inflation and Federal Reserve Response, Financial and Commodity Market Volatility. , supply chain issues and the number of workers returning to the office.
Revenue growth is expected to average 2.4% from fiscal year 2024 to fiscal year 2026, but an unexpected drop would require at least a short-term fix by using the city’s accumulated reserves or adjusting spending.
Growth in city-funded spending is expected to average 1.9% over the next few years, which is below inflation expectations. This rate of growth would be affordable, but spending is unlikely to meet current projections.
DiNapoli identified several existing spending risks in the financial plan, including optimistic spending projections for overtime, Carter case spending (involving students with disabilities), and charter school spending. Combined with the MTA’s Bus and Paratransit Support Funding Risks, Public Health Corps Initiative, and several smaller programs, the risks total more than $3 billion annually by FY2026. , with tax offsets bringing the net risk to approximately $2.1 billion.
Unforeseen risks to economic, revenue and expenditure projections and foreseeable but difficult to quantify concerns such as cost inflation and wage pressures are also expected to arise over the plan period.
DiNapoli’s report also revealed that the city expects $6.6 billion in reimbursements from FEMA over three years through fiscal year 2022. As of February 2022, the city has collected or claimed $625 million. amounts expected for fiscal years 2020 and 2021. The city advised CSO staff that the time to claim, bill, and collect funds from FEMA is taking longer than previous disasters.
DiNapoli encouraged the city’s budget planners to seek to generate more profitability, monitor the performance of services provided as part of changing staffing trends and build reserve levels as part of their strategy. comprehensive budget management. These actions would allow the city to meet unexpected challenges, including new spending obligations, and strengthen its tax base to keep New York attractive to residents and visitors and create more economic opportunities.
New York City Financial Plan Review
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